Vulcan Value Partners, an investment management firm, published its “Large Cap, Small Cap, Focus Composite, Focus Plus Composite, and All Cap Composite” second quarter 2021 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap Composite Fund delivered a 12.4% net return for the second quarter of 2021, 9.9% for the Small Cap, 14.8% for the Focus Composite Fund, 13.9% return was delivered by the Focus Plus Composite Fund, and 13.6% was gained by the All Cap Composite Fund for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
In the Q2 2021 investor letter of Vulcan Value Partners, the fund mentioned Upstart Holdings, Inc. (NASDAQ: UPST), and discussed its stance on the firm. Upstart Holdings, Inc. is a San Mateo, California-based consumer lending company, that currently has a $10.5 billion market capitalization. UPST delivered a 231.29% return since the beginning of the year, while its 3-month returns are up by 40.67%. The stock closed at $133.17 per share on August 05, 2021.
Here is what Vulcan Value Partners has to say about Upstart Holdings, Inc. in its Q2 2021 investor letter:
“During the quarter, we purchased Upstart Holdings Inc. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. Consumers can access Upstart-powered loans through its banking partners’ websites; however, most of its loans are underwritten on Upstart.com. Upstart has a fee-based revenue model and retains only a small portion of the loans, while the majority of the loans end up on the balance sheets of its partner banks or are sold into the capital markets. We believe Upstart’s technology is superior to the FICO score, which is ubiquitous within the consumer credit markets. With an excellent product and a large total addressable market, we believe that Upstart’s prospects are bright.”
Photo by Austin Distel on Unsplash
Based on our calculations, Upstart Holdings, Inc. (NASDAQ: UPST) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. UPST was in 13 hedge fund portfolios at the end of the first quarter of 2021, compared to 15 funds in the fourth quarter of 2020. Upstart Holdings, Inc. (NASDAQ: UPST) delivered a 12.50% return in the past month.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
